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South Africa is reluctant to tap billions of dollars in climate finance offered by some of the world\u2019s richest nations because of the cost and strings attached, Electricity Minister Kgosientsho Ramokgopa said.<\/p>\n
South Africa clinched a deal, known as the Just Energy Transition Partnership and initially worth $8.5 billion, at the COP climate summit in Glasgow in 2021. Under the accord, the country would receive funding in exchange for cutting coal-fired power generation in one of the world\u2019s most carbon-intensive economies.<\/p>\n
The funds were set to come in the form of grants, loans and guarantees from France, Germany, the US, UK and the European Union. Finance from the World Bank and other development finance institutions was also on offer.<\/p>\n
Since then, South Africa has said it will miss deadlines to close coal-powered plants as it\u2019s concerned about energy security. Politicians including Ramokgopa have repeatedly expressed concern about the conditions under which funds will be disbursed.<\/p>\n
\u201cSouth Africa will determine the pace and scale of that transition\u201d and will pick the projects to benefit from the funds, the minister said in an interview with Johannesburg\u2019s 702 Talk Radio from Davos, Switzerland.<\/p>\n
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\u201cYou juxtapose going out into the debt capital market and raising a similar amount of capital, and then you do a comparison of which money is cheaper,\u201d he said. \u201cAnd at this stage, as I speak to you, it doesn\u2019t appear to be competitive.\u201d<\/p>\n
It\u2019s unclear what finance Ramokgopa was referring to.<\/p>\n
While Denmark and the Netherlands joined the agreement later \u2014 bumping up the total to $9.3 billion \u2014 the US last year withdrew its offer of $1 billion in funding on commercial terms.<\/p>\n
Still, hundreds of millions of dollars have been disbursed in the form or grants and France and Germany have together loaned South Africa\u2019s National Treasury about \u20ac2 billion ($2.34 billion) under the program.<\/p>\n
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The last German loan, through its development bank KfW, was a \u20ac500 million, 13-year facility with a three-year grace period and a fixed interest rate of 4.31%. South African rand-denominated, 10-year government bonds currently trade at a yield of 8.43%.<\/p>\n
The UK offered a $1 billion guarantee for African Development Bank debt that South Africa hasn\u2019t taken up, and the EU, through the European Investment Bank, has lent some money to South African institutions out of an offer of about $1 billion.<\/p>\n
In June, South Africa cleared a hurdle to access $2.6 billion in funds from the World Bank and other institutions under a pact with the Climate Investment Funds, an international climate-finance facility. That pact had been delayed by South Africa, postponing power-plant closures. While the interest rate on that finance has yet to be determined, it would be at concessional rates.<\/p>\n
Ramokgopa said South Africa\u2019s plan to expand its power grid may be an opportunity to utilise the offered funds, but those would need to be \u201caffordable.\u201d<\/p>\n
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